What Is Selling a Business Like?

Selling off a small business is an elaborate process that includes a number of issues. It may possibly require you simply to hire a broker, an accountant, and a lawyer for the process. A successful sale will be contingent on factors like your reason for selling, timing, your business’s operational strength, and your business’s structuring. The sale is going to take up a lot of time and, as soon as it’s sold, you’ll have to figure out some good methods to handle your profits.

Why You Might Want to Sell

So you’ve decided that it’s time to sell your company. Prospective buyers will most likely ask why you’re doing this as a first question.

An owner will generally sell off their business for several possible motives:

  • They’re retiring.
  • There are irreparable partnership disputes.
  • There’s been an illness or death in the family.
  • They are becoming overwhelmed.
  • They’ve become bored.

Sometimes owners think about selling their business when it’s no longer profitable. However, this makes it more difficult to draw in buyers. Think about your company’s selling potential and your own timing. You can make your small business look more enticing by talking about:

  • Rising profits
  • Consistent earnings
  • A robust customer base
  • A huge, years-long contract

Timing Your Sale

You should prepare for your sale early on — at least a year or more before you want to actually sell it off. This preparation time will assist you in building up your business structure, customer base, and financial records to help make it more lucrative. This will also help ease the changeover to the new owner and keep everything going smoothly.

Business Valuation

The next step is to figure out your business’s worth so that you don’t over- or under-sell yourself. Find a business appraiser for an evaluation. They’ll help produce an in-depth explanation of your business’s value. This will also help provide credibility to your asking price and will help you see if your listing price is fair.

Should You Sell Independently or Use a Broker?

Getting the sale on your own means you can save some money and not pay a broker’s commission. It’s also one of the best routes when you’re selling to a member of the family or current employee. On the other hand, a broker might free up some of your time so you can maintain regular business operations, keep the sale quiet, and make the best profit possible (since the broker will want to get the best commission possible). Talk about your expectations with your broker and keep up regular communication.

How to Find a Buyer

SCORE is a nonprofit association for entrepreneurs and a partner with the U.S. Small Business Administration. According to their estimates, it could take six months to two years for your business to finally sell. It’s hard to find the right buyer, so don’t limit how you advertise so that you’ll attract more prospective buyers.

Once you’ve found some potential buyers, make sure you follow these steps to keep things moving:

  • Attract two or more potential buyers to cover yourself if the first deal falls through.
  • Keep in contact with your prospective buyers.
  • Before you give out information about your business, find out if the prospective buyer prequalifies for financing. If you’re going to finance the sale, speak with an accountant or attorney so you and the buyer can reach a mutual agreement.
  • Give some room for negotiation, but remain firm on a reasonable price while thinking of the business’s future worth.
  • Get all agreements in writing. Prospective buyers need to sign a non-disclosure/confidentiality agreement to safeguard your information.
  • Do what you can to get the signed purchase agreement into escrow.

You might have to deal with the following paperwork after your sale:

  • The bill of sale, which shifts the business assets over to the buyer
  • A lease assignment
  • A security agreement, in which the seller retains a lien on their new business

Additionally, the buyer might have you sign a non-compete agreement. This confirms that you will not start up a new, competing business and take customers away from them.

How to Handle the Profits

Wait a while, at the very least several months, before you spend any of your profits. Draw up a plan that outlines your fiscal goals and also determine any tax penalties that could come from this sudden wealth. Talk to a financial advisor to figure out how you should best invest your money and start focusing on the long-term, with goals like getting out of debt or saving for your retirement.

If you need help selling a business, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.